Thursday, 8 June 2017

3 Events to Watch on Thursday

If you are wondering what will drive markets on Thursday, stop looking! There are three key political events on the watch for today and each of them promises high-impact on world markets. Increased volatility is expected both on stock and currency markets.

1. James Comey testimony before Senate

James Comey, the former Federal Bureau of Investigation Director, is due to testify before the Senate Intelligence Committee on Thursday regarding potential links between the Trump presidential campaign and the Kremlin and his talks with President Donald Trump.

Comey was unexpectedly fired last month because “the FBI has been in turmoil”, according to President Trump. The decision took market players by surprise and led to a massive sell-off of US equity indexes, marking the worst session so far this year.

On Wednesday, the Senate released Comey’s written testimony, which explains in details his contacts with the Republican leader. In the text, Comey says Trump asked him for “loyalty”.

Key quotes:

“We [FBI team] did not have an open counter-intelligence case on him [President Trump]. We agreed I should do so if circumstances warranted.”

"He [President Trump] then said, 'I need loyalty.' I replied, 'You will always get honesty from me.' He paused and then said, 'That's what I want, honest loyalty.'”

"He said he had nothing to do with Russia, [...] and had always assumed he was being recorded when in Russia. He asked what we could do to 'lift the cloud.'"

Trump comments could be interpreted as interference to a federal investigation, a severe crime that could lead to unknown consequences for the administration. Fears over this situation spiked demand for safe haven assets in recent weeks.

2. ECB’s monetary policy meeting

The European Central Bank is gathering for a new policy meeting on Thursday. The regulator is not expected to make changes on its current policy configuration, but there are expectations for a slight softening on the rhetoric, especially looking at the quantitative easing program.

In the last few months, ECB President Mario Draghi defended the QE program arguing improvements in inflation are only temporary, driven by rising crude prices. Depending on what’s said in the ECB statement, the euro could be exposed to sudden changes.

3. UK parliamentary elections

Investors will be looking at the parliamentary elections in the UK for a simple reason: Brexit negotiations. Prime Minister Theresa May has called early elections to ensure a stronger support ahead of the Brexit talks with the European leadership, but it seems her popularity has been affected by the two recent terrorist attacks in the country. A weaker outcome for the Conservative party would play bullish for the euro and bearish for the pound.